Sterling Financial Corp. in Spokane said Tuesday that it plans to expand through new branches and acquisitions, and that Northern California remains a focus.
“We expect to grow both internally and from our merger and acquisition activity,” Harold Gilkey, the chief executive officer of the $9.8 billion-asset company, said during an investor and analyst presentation in New York. “We will continue to focus on the West.”
Sterling is expected to close its first deal today for a banking company in Northern California, the $355 million purchase of $1.3 billion-asset Northern Empire Bancshares in Santa Rosa. The purchase is to give Sterling 13 branches in counties north and east of San Francisco.
Mr. Gilkey said that he may find other opportunities to buy companies as the effects of the inverted yield curve and higher compliance costs take their toll on potential targets. “Companies are sold, not bought,” he said. “We will be in the best position to acquire them,” he added.
The company’s base in the Pacific Northwest has been a positive for Sterling’s growth in the past year, Mr. Gilkey said. “We’re blessed in the Northwest with a very good economy,” he said.
Sterling reported fourth-quarter profit of 57 cents a share, in line with analyst estimates and up 21% from a year earlier. For the full year, loans increased 44% from a year earlier, to more than $7 billion, and deposits were $6.75 billion, a 40% increase.
After reporting its fourth-quarter results, Sterling said that it expects earnings this year to be in a range of $2.27 to $2.37 a share, compared with $2.01 a share in 2006. The company did not change its guidance Tuesday.
“I thought it was a good meeting,” said Louis Feldman, an analyst at Punk Ziegel & Co. The company’s goals “seemed to be fairly reasonable in my mind,” he said in an interview.
“They’d like to see organic growth, and they had pretty good organic growth in ‘06,’’ said Mr. Feldman, noting that Sterling also said it will “push” on fee income and deposits.
Its statement about acquisitions also would continue a trend that has seen the company add roughly one company a year, on average, for the last 20 years, he said.
“They’re trying to bite off a lot,” said James Bradshaw, an analyst at D.A. Davidson & Co., “but certainly the economies [in their area] are strong. The big question is deposit gathering,” he said in an interview.
The Northern California deal gives the company an opportunity to boost loan growth, according to Mr. Gilkey.
He said that expanding into Northern California is both “exciting” and a natural progression “because over the period of the last decade we have been a producer of loans, both commercial and residential, in Northern California. This expansion gives us the opportunity to integrate the entire Sterling family into a new market.’’
In response to a question about the details of its merger and acquisition strategy — from Brett Rabatin, an analyst at First Horizon National Corp.’s FTN Midwest Securities Research Corp. — Mr. Gilkey said, “I view us as being an acquirer. If you can identify any acquirees, I’d be happy to take a look.”
“They’ve got an awful lot of space between the northern boundary of Sonoma National Bank, Northern Empire, and the Oregon border where their next closest branch is,” Mr. Feldman said. “Logic would dictate that they will do another deal. Whether that’s in 2007, I don’t know.”
The bank became a state-chartered commercial bank in July 2005.
